Crime Insurance

Increased Need for Crime Insurance for Small Businesses

Diligence is the key to preventing losses

Since the 2008 economic decline, there has been a sharp rise in crimes by employees and third parties. Fueled by the fear of unemployment, workers are fighting back against their employers. They’re more likely to take what they feel they deserve because of the work they’ve done for their company over the years. Not surprisingly, many companies are taking a closer look at risk controls to cut unnecessary costs and uncovering theft issues that may have been undetected in the past.

The majority of people who commit these crimes are not professional criminals. Rather, they’re in a financial  bind and tend to rationalize such behavior as borrowing the money until they can pay it back.

Small businesses must take all necessary precautions to prevent employee theft and fraud. To this, they must address the fraud risks or their policy limits to adjust for the related losses. Only one in four private companies buys crime insurance. Stand alone crime policies are better than crime coverage added to Business Owners Policies (BOPs).

One way to determine an appropriate crime limit is to assume 5 percent of the company’s revenue will be the cost of fraud, and include that amount in the limit. Another way is to use organizations like Advisen that can evaluate a client’s cash flow, number of employees and business locations, employee turnover rates, and effectiveness to its internal risk controls.

Risk controls to minimize employee fraud:

  • Use prenumbered checks typed or numbers written in permanent ink
  • Be aware of employees who object strongly to new policies concerning financial, inventory, or supply matters
  • Employees with duties that  include check preparation or distribution should not reconcile the bank checking account
  • Improve background checks of job applicants
  • Separate receiving, store keeping, and shipping functions. Complete physical inventories annually and assign them to an individual who is not responsible for inventory records.
  • Be aware of employees who exhibit signs of compulsive gambling, persistent borrowing, or repeated requests for salary advances.
  • Separate mail opening and posting functions
  • Record checks and cash in appropriate registers and stamp checks for deposit only
  • Be aware of employees who suddenly want to work late

Source: Russ Banham, Independent Agent

5.00 avg. rating (87% score) - 1 vote
Categories: Crime, Risk Management, Small Business, Technology, Theft

Tech Company Advertising Injury Coverage

Why it’s necessary

The standard General Liability policy covers personal injury and advertising injury unless the insured is in the business of advertising, broadcasting, publishing, or telecasting. For this reason, there is no coverage for IT firms that are in the business of designing websites, determining content, providing content, or providing internet access.

Advertising InjuryWhy do tech firms need personal injury coverage? Coverage may be needed to against an allegation of slander, libel, or oral or written publication that violates a person’s right of privacy. It is not too difficult to see how a tech firm could get sued under these circumstances. Coverage may also be needed for advertisement injury to protect against allegation of infringement of copyright, trade dress, or slogan in your advertisement. The key word is advertisement. There is no coverage for infringement of copyright, trade mark, trade dress, or slogan unless they occur in an advertisement.

What’s not covered

An exclusion in the policy form eliminates coverage for injury arising out of electronic chat rooms or bulletin boards that the insured hosts, owns, or exercises control over. In addition, there is an exclusion arising out of the unauthorized use of another’s name or product in your email address, domain name, meta tag, or similar tactic used to mislead the someone else’s potential customers.

It is obvious that the standard General Liability form does not adequately protect tech companies or IT professionals against these important exposures. As a result, coverage can be sought as part of a Professional Liability or Errors & Omissions policy form. These policies can add essential coverages for tech firms in the business of advertising or publishing and violation of a person’s right of privacy or undue publicity, intellectual property infringements, etc.

It is strongly recommended that tech companies or IT professionals deal with a tech insurance specialist to make sure that their coverage needs are addressed.

 

3.00 avg. rating (67% score) - 1 vote
Categories: Advertising Injury, Errors & Ommissions, Personal / Advertising Injury, Professional Liability, Technology
Cyber Risk Insurance

Managing Cyber Risk

Cyber risk is not something that organizations can suppress or reduce to insignificance. Because companies now rely on IT and technologies such as computing and mobile devices and allow employees to work on their own devices,  incidents will happen and preparations for incident response are vital.

The news, in this respect, is mixed. Almost two-thirds of survey respondents say their organization has formally assigned roles and responsibilities to key individuals as part of an incident response plan. However, few have made contingency plans with preferred vendors. Less than half said they have a strategy for communication to the general public in case of a cyber risk incident. The public sector is doing better in this respect, with more than 60 percent of respondents saying they have such a strategy.

Organizations surveyed are introducing new systems and standard practices to mitigate information security and privacy risk. Three out of four respondents said their organization has introduced new IT infrastructure and more than two out of three now regularly update their antivirus software, while a similar proportion have introduced secure configurations for network devices such as firewalls, routers, and switches.

4.00 avg. rating (77% score) - 1 vote
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Categories: Cyber Liability, Technology

Loss of Electronic Data

It’s not covered under a General Liability policy

Standard business General Liability policies don’t adequately cover the liability risk of property damage to electronic data.

Service or contracting businesses can cause property damage resulting in loss of or damage to a third party’s digital data that is housed on their computer system. This exposure is not limited to IT firms.

Understanding the terminology

The term property damage used on standard General Liability forms is defined as

  • physical injury to tangible property including loss of use thereof; and
  • loss of use of tangible property that is not injured.

According to these definitions, electronic data is not tangible property.

Electronic data is information, facts, or programs stored as or on, created or used on, or transmitted to or from computer software, hard discs, CD-ROMS, tapes, drives, cells, data processing devices, or any other media used with electronically controlled equipment.

What you can do

This problem can be resolved by the addition of various endorsements to cover property damage to electronic data. The cost is usually minimal.

However, some General Liability carriers that cater to IT firms will not add the endorsements. As a result, IT firms may need to verify that their Professional Liability (Errors & Omissions Liability) policy will cover this exposure. The key is to locate the definition of “tangible property” and find out if electronic data is included.

 

2.00 avg. rating (57% score) - 1 vote
Categories: General Liability, Professional Liability, Technology